My KiwiSaver has gone down!
You may have noticed a drop in your KiwiSaver balance recently and been wondering what to do about it.
Below is an email I sent out last year, I thought about rewriting it but actually its still relevant. Please read and let me know if you have any questions about your KiwiSaver.
Generally people are worried about why it’s gone down, and wondering what they should do about.
The general theme whenever the market goes down is:
Is this an issue?
Is this time different to every other time?
Should I change my funds to a more conservative fund?
Should I change providers?
And the answers, now and every time it happens in the future are No, No, No and No.
Markets will go up and down, and so your KiwiSaver will go up and down. This is normal, and to be expected, and not isolated to any one provider. We are not worried about the market on a day by day basis, (where it’s a coin toss as to whether the market goes up or down), but over the long term, in years, where the market almost always is up.
This time is not different, it’s just the usual cycle. And it will hit all providers, some more than others each time, but no one provider is immune to volatility.
So, what should you do?
Basically nothing, ignore the down and understand that your KiwiSaver is on sale currently, and will go back up again.
What do I mean by on sale? I mean that the unit price (the actual thing that is important in your KiwiSaver), has gone down, so when you next put money in, it will be cheaper, and you will get more units for your money.
If you login to your KiwiSaver with your provider, you should be able to see the unit price, it’s the change in this that causes the ups and downs.
If you scale your KiwiSaver back to a more conservative fund, you are locking in the loss. What I mean is that if your unit price drops from $1 to $0.96c, and you change funds, you will lose that 4c forever. But if you leave it as it is, it will eventually go back up and much higher.
There are a lot of videos and articles out there on volatility and markets, and they all say the same thing, don’t change, it will be fine.
Here are two I have done:
https://www.youtube.com/watch?v=RPMpHCmXtyM (This one was in relation to the Trump election but its still relevant)
and here is one from Dave Ramsey:
Have a look at these and let me know if you have any questions or want some more advice. If you feel you are in the wrong fund for your appetite for investment, we can send you some tools to review this.
Now if you plan to get your money out in the next 6 months to a year, we may want to double check the fund to minimise short term volatility, so get in touch.
So in summary, it’s not a problem, it’s not different, and you should not change funds or providers. Its normal market volatility.
I hope this helps, let me know if I can clarify anything.